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Entrepreneurial tail risk: Implications for employment dynamics

Thorsten Drautzburg

Journal of Monetary Economics, 2019, vol. 104, issue C, 85-100

Abstract: New businesses are important for job creation and have contributed more than proportionally to the recent economic fluctuations. Given the risk exposure of entrepreneurs, this paper asks whether changing risk can explain the dynamics of new businesses. It makes two contributions. First, it provides a tractable, quantitative framework for analyzing business creation when entrants are exposed to idiosyncratic risk. Second, it provides conditions under which data on the size distribution of new businesses and their exit rates identifies entrepreneurial risk. According to the structural estimates, fluctuations in such risk explain around 40% of the employment fluctuations at new U.S. businesses.

Date: 2019
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Working Paper: Entrepreneurial tail risk: implications for employment dynamics (2013) Downloads
Working Paper: Entrepreneurial Tail Risk: Implications for Employment Dynamics (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:104:y:2019:i:c:p:85-100

DOI: 10.1016/j.jmoneco.2018.08.008

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